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Business leaders' penchant for 'cash-flow rights' and the dangers of more Satyams

"There is still a large section of corporate India, which unfortunately believes that axiomatically, they have better cash-flow rights and a greater call on cash flows than ownership," he says.

twitter-logo E Kumar Sharma        Last Updated: February 6, 2017  | 16:20 IST
Business leaders' penchant for 'cash-flow rights' and the dangers of more Satyams

What lessons can Omkar Goswami's book "Goras and Desis: Managing Agencies and the Making of Corporate India" offer to promoters of Indian family-led businesses? Crucial perhaps, given that, bulk of the companies (almost 70 per cent) listed on the Bombay Stock Exchange are family-led businesses. Ask Goswami and his response is a mix of hope and worry .

"There is still a large section of corporate India, which unfortunately believes that axiomatically, they have better cash-flow rights and a greater call on cash flows than ownership," he says.

Clarifying that it is his genuine belief and not a plug for Dr Reddy's, a company, on whose board he serves as an independent director, he says, "With the exception of few companies, like Dr Reddy's, look at the Group A and the Group B companies of the Bombay stock exchange and you would be hard-pressed to go beyond 50 of them, and not necessarily in order of market cap, where you could say, I will be proud to be on that board." That, he says, "Is a pretty poor situation given the size of capitalization and the size of growth."

But then, almost in the same breath, he is also quick to add: "It is definitely going to change but in between we will have a few more Satyams (the company, which hit news headlines in 2009 over scandal involving cooking of books)." In fact, referring to a specific chapter dedicated to this subject, he goes on to say:   "There  are managing agency like structures all over the world . Everybody likes greater cash flow rights than to put in cash. Everyone wants to take out more than they put in and as long as that continues managing agency like structures will survive, (be it) with 'goras' or 'desis.'

Goswami, the economist, who runs CERG Advisory, a corporate and economic consulting firm also serves as independent director on the boards of some of the major listed companies of India like Dr Reddy's and Godrej Consumer Products, among others, was in Hyderabad to launch his book. The event was organized by Satish Reddy, chairman, Dr Reddy's, G V Prasad, co-chairman and CEO of the company and his wife Anuradha Prasad, the managing trustee of Dr Reddy's foundation and the daughter of the company's founder Kallam Anji Reddy.

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